Growth vs. Green: Decoding India's Industrial Climate Conundrum

What is the central issue in India's industrial climate strategy?

India's climate policy faces the dual challenge of sustaining rapid industrial growth to meet its 'Viksit Bharat 2047' vision while simultaneously meeting its commitment to achieve net-zero emissions by 2070. The industrial sector is at the heart of this conundrum. According to India's First Biennial Transparency Report (BTR1), submitted in December 2023, the industrial sector was responsible for 28.3% of the country's total greenhouse gas emissions in 2019 (excluding land use, land-use change, and forestry). This figure comprises emissions from fuel consumption in manufacturing and construction (19.5%) and those from industrial processes and product use (8.8%). The core issue, as highlighted by recent analysis, is that a substantial portion of these emissions originates from a poorly defined and largely unregulated segment of the industrial economy.

What are the government's primary policies for industrial decarbonisation?

The government's strategy for mitigating industrial emissions has primarily relied on two major market-based mechanisms. The first is the Perform, Achieve and Trade (PAT) scheme, which the BTR1 acknowledges as a key initiative. Operational since 2012, PAT focuses on improving energy efficiency by setting mandatory specific energy consumption reduction targets for 13 designated energy-intensive sectors, including thermal power plants, railways, and commercial buildings. Units that overachieve their targets can sell energy-saving certificates to those that underachieve.

More recently, the government has introduced the Carbon Credit Trading Scheme (CCTS), notified in June 2023. This marks a strategic shift towards directly targeting emission intensity. The CCTS is being rolled out for nine industrial sectors, including high-emitting industries like aluminium, cement, iron and steel, petrochemicals, pulp and paper, and textiles. The scheme aims to create a domestic carbon market where companies can trade credits earned by reducing their emissions below a set benchmark. The government's stated objective for both schemes is to use market incentives to drive technological upgrades and operational efficiencies in the country's largest industrial emitters.